IG Group hit by lower market volatility as revenue dips in Q3
IG Group has put a quarter-on-quarter decline in revenue in Q3 down to reducing levels of volatility in financial markets, as the spread betting and contracts for difference provider continues to feel the impact of new regulations from the European Securities and Markets Authority (ESMA).
Revenue for the three months through to February 28, 2019, totalled £108.0m (€124.4m/$141.8m), down 12% on £122.1m in Q2.
IG Group said lower revenue per client in the quarter reflects the reduced levels of market volatility during the three-month period, while new ESMA rules also hit revenue, as they also did in latter part of the first half.
Q3 was the second quarter for IG Group in which ESMA restrictions relating to the offering of contracts for difference (CFDs) products, as well as binary options to retail clients in the UK and the European Union, were in effect throughout.
As such, IG Group was particularly hit in the UK and EU market, with UK revenue down 16% from £49.7m in Q2 to £41.8m, while EU revenue dropped 13% from £17.3m to £15.1m.
Asia-Pacific revenue also slipped 6% to £35m, but IG Group did see growth in the European, Middle East an Africa (EMEA) region – excluding EU – with revenue up 6% to €11.3m. As a result, over-the-counter (OTC) leveraged revenue for Q3 stood at £103.2m, down 11% on Q2.
IG Group suffered a similar decline in the US, with revenue down 11% to £4.0m, while share dealing and investments also took a hit as revenue slipped 38% to £800,000.
However, despite a hit to revenue, IG Group did note a marginal increase in the number of clients using its services. In total, 125,600 customers are now registered with the provider, up 1% on 124,100 in Q2.
Some 84,200 were registered as OTC clients in Q3, compared to 83,300 in the previous quarter, while the number of ESMA region clients also increased 1% quarter-on-quarter to 51,800.
Focusing in on the ESMA region, IG Group has said that the large majority of its clients are classed as retail, with the 46,600 in Q3 up 2% on Q2. The number of professional clients remained level at 5,200.
In terms of the provider’s year-to-date performance, group revenue stands at £359.0m, which put IG Group 15% behind where it was at by the end of Q3 last year (£421.3m).
The EU has suffered the largest dip in revenue, with this down 39% from £92.6m to £56.9m while UK revenue is down 22% from £185.8m to £145.5m. However, other regions are ahead on a year-to-date basis, with EMEA excluding EU up 22% to £31.8m, Asia-Pacific rising 7% to £109.1m and the US 7% to £12.4m.
IG Group said in a statement: “As demonstrated in Q3, the Group’s revenue in any one period is affected by market volatility and client trading opportunities, and the level of revenue in the last quarter of FY19 is difficult to predict accurately.
“As previously communicated, the company continues to expect that its revenue in FY19 will be lower than in FY18.”
IG Group also noted that its cost guidance for FY19 remains unchanged, with total operating costs set to be at a similar level to the £290m operating costs in FY18.